JPMorgan Chase, Goldman Sachs, Bank of America

It is expected that when the banks start posting the results of the second quarter on Tuesday, led by JPMorgan Chase again Bank of Americarevenues from trading stocks and fixed income will approach, or even exceed, records set earlier this year.

That’s a key part of what veteran analyst Mike Mayo of Wells Fargo calls the “sweet spot” in the financial sector right now. Both of the banks’ profit engines – Wall Street and Main Street – are in growth mode at the same time.

Big US banks are getting a boost in helping companies buy stocks, fueled by last month’s giant SpaceX IPO, while risk-takers are also thriving as the country’s turmoil, including the Iran war, causes volatility across asset classes.

“You’ve seen the largest IPO in history, the pace of consolidation in what is going to be a record year, and the expansion of trading to include equity and fixed income across the board,” Mayo told CNBC.

The central bank’s quarterly earnings come at an unusually good time for the industry. After years of navigating high interest rates and fears of inflation-fueled inflation, lenders are benefiting from an unusual combination of booming Wall Street activity, strong consumer credit and a longer take on business lending.

“There’s not much more you can ask for,” Mayo said.

These trends, combined with the Trump administration’s push to ease banking regulations, have helped financial stocks outperform the market for two years in a row, Mayo noted. That is pushing the rate higher again as investors look for signs that the momentum could continue into 2027.

JPMorgan, Bank of America, Citigroup, Wells Fargo again Goldman Sachs will post the results early Tuesday, with Morgan Stanley report on Wednesday.

Investment banking profits for the group could increase by 26% from last year, while trading capital could jump 14%, according to KBW analyst Chris McGratty.

In addition to the hundreds of millions of dollars in fees paid by SpaceX banks – led by Goldman Sachs and Morgan Stanley – in the IPO itself, the firms received money to raise the debts of the new public company, and have a role in managing the fortunes of newly minted billionaires and billionaires.

In addition, Goldman and Morgan Stanley are likely to reap so-called soft dollars from SpaceX’s initial public offering, according to Jay Ritter, professor emeritus of finance at the Warrington College of Business, University of Florida.

Soft dollars are fees that investment banks pay for a piece of an oversubscribed IPO, Ritter said.

“The biggest money generator for investment banks in IPOs is not bank money, but the ability to allocate shares to hedge funds and active mutual funds that pay soft dollars,” he said.

Meanwhile, trading gains were driven by strength in currencies as stock markets rose during the quarter, and an increase in fixed income activity after the Iran conflict sent oil prices, interest rates and currency volatility higher, McGratty said.

“Banks are doing a good job these days of finding volatility, whereas in previous cycles, they were caught offsides,” McGratty said.

But Mayo argued that the most important developments this quarter may have occurred away from Wall Street.

The no-frills business of commercial lending may be turning around after years of weakness as banks look to wrest market share from private mortgage lenders and as the virtual economy spreads throughout the economy, he said.

“Demand is back as companies take uncertainty as something new and build that new industry, plant crops and continue business,” said Mayo.

The practice may benefit regional lenders as well Fifth Third because commercial lending represents a larger part of their business than a variety of giants like JPMorgan, Mayo said.

Consumer banking also appears healthy. Low unemployment has kept borrowers current on mortgages, auto loans and credit cards, limiting losses.

There are still some risks for the quarter, including a potential breakout in the sovereign debt space, although those concerns have eased for most banks due to the absence of new “cockroaches” emerging. JPMorgan CEO Jamie Dimon warned analysts and investors last year after the collapse of auto lender Tricolor Holdings that “if you see one cockroach, there are probably more.”

Another is whether competition for deposits is intensifying, as some players are forced to pay higher rates to attract and retain dollar deposits, McGratty said. In the event that interest rates are stable or rising, that may put pressure on borrowers’ margins.

After two years of market-leading returns, investors are less interested in how strong the last quarter was than whether this unusual positive backdrop can last.

“We know the quarter is going to be strong, so I think the question you’re asking yourself is about sustainability, right?” McGratty said. “Is everything stable?”